Hong Kong: Lending & Secured Finance

This country-specific Q&A provides an overview of Lending & Secured Finance laws and regulations applicable in Hong Kong.

  1. Do foreign lenders require a licence/regulatory approval to lend into your jurisdiction or take the benefit of security over assets located in your jurisdiction?

  2. Are there any laws or regulations limiting the amount of interest that can be charged by lenders?

  3. Are there any laws or regulations relating to the disbursement of foreign currency loan proceeds into, or the repayment of principal, interest or fees in foreign currency from, your jurisdiction?

  4. Can security be taken over the following types of asset: i. real property (land), plant and machinery; ii. equipment; iii. inventory; iv. receivables; and v. shares in companies incorporated in your jurisdiction.

  5. Can a company that is incorporated in your jurisdiction grant security over its future assets or for future obligations?

  6. Can a single security agreement be used to take security over all of a company’s assets or are separate agreements required in relation to each type of asset?

  7. Are there any notarisation or legalisation requirements in your jurisdiction? If so, what is the process for execution?

  8. Are there any security registration requirements in your jurisdiction?

  9. Are there any material costs that lenders should be aware of when structuring deals (for example, stamp duty on security, notarial fees, registration costs or any other charges or duties), either at the outset or upon enforcement?

  10. Can a company guarantee or secure the obligations of another group company; are there limitations in this regard?

  11. Are there any issues that lenders should be aware of when requesting guarantees (for example, financial assistance or lack of corporate benefit)?

  12. Are there any restrictions against providing security to support borrowings incurred for the purposes of acquiring shares: (i) of the company; (ii) of any company which directly/indirectly owns shares in the company; or (iii) in a related company?

  13. Can lenders in a syndicate appoint a trustee or agent to (i) hold security on the syndicate’s behalf, (ii) enforce the syndicate’s rights under the loan documentation and (iii) apply any enforcement proceeds to the claims of all lenders in the syndicate?

  14. If your jurisdiction does not recognise the role of an agent or trustee, are there any other ways to achieve the same effect and avoid individual lenders having to enforce their security separately?

  15. Does withholding tax arise on (i) payments of interest to domestic or foreign lenders, or (ii) the proceeds of enforcing security or claiming under a guarantee?

  16. If payments of interest to foreign lenders are generally subject to withholding tax, what is the standard rate and what is the minimum rate possible under double taxation treaties?

  17. Are there any other tax issues that foreign lenders should be aware of when lending into your jurisdiction?

  18. Are there any tax incentives available for foreign lenders lending into your jurisdiction?

  19. Is there a history in your jurisdiction of financing structures being challenged by tax authorities, and if so, can you give examples.

  20. Do the courts in your jurisdiction generally give effect to the choice of other laws (in particular, English law) to govern the terms of any agreement entered into by a company incorporated in your jurisdiction?

  21. Do the courts in your jurisdiction generally enforce the judgments of courts in other jurisdictions and is your country a member of The Convention on the Recognition and Enforcement of Foreign Arbitral Awards?

  22. What (briefly) is the insolvency process in your jurisdiction?

  23. What impact does the insolvency process have on the ability of a lender to enforce its rights as a secured party over the security?

  24. Please comment on transactions voidable upon insolvency.

  25. Is set off recognised on insolvency?

  26. Can you comment generally on the success of foreign creditors in enforcing their security and successfully recovering their outstandings on insolvency?

  27. Are there any impending reforms in your jurisdiction which will make lending into your jurisdiction easier or harder for foreign lenders?

  28. What proportion of the lending provided to companies consists of traditional bank debt versus alternative credit providers (including credit funds) and/or capital markets, and do you see any trends emerging in your jurisdiction?

  29. Please comment on external factors causing changes to the drafting of secured lending documentation and the structuring of such deals such as (i) Brexit (ii) LIBOR transition and/or (iii) COVID 19